I get so frustrated when people spew on about the supposed horrid state of the economy. For years, yes, years, I have been preaching that the economy is in great shape and getting better every day.
But many were simply not convinced. And it’s caused those people to be skittish about opportunities they should have leveraged. Instead, they missed out. My best hunch as an armchair psychologist, and someone who dressed as a therapist once for Halloween (OK, that’s a lie, it was Elmo), is that people were so psychology battered by the events of 2008 and beyond that it altered their ability to see the positive state of the economy. This prevented them from making proactive decisions that would have yielded stronger results. In 2011, my mantra was the investors of today will be the heroes of the upcycle.
I am writing this not as an "I told you so," but as more of a plea to those that still do not believe the economy is in amazing shape. You must make a move now before it is too late. This is the last opportunity to leverage this bountiful time before we hit another recession, which I am concerned will happen within 18 months or so.
Plus, the decision paralysis that came with the election should have ebbed. The world did not come to an end on election night, and after a brief hiccup Wall Street decided all was groovy and sent the market once again into record-breaking mode.
“The economy is extremely strong as well as the strongest in the world,” said Sarah Quinlan, SVP MasterCard Insights, who I saw speak at HX: Hotel Experience, held in New York City.
How does she know this? She tracks more than 160 million transactions per hour, then analyzes them through a filter with more than 1.5 million rules. Even the federal government uses information MasterCard provides in its reports.
Here’s some reasons everyone needs to chill out in the short term about the state of the overall economy.
1. The Hotel Business is Amazing
According to STR, occupancy was never higher than in September 2016, reaching 67.1 percent. When 2016 wraps up, STR also sees average daily rate up 3.2 percent and a 3.1-percent rise in 2018, while revenue per available room should rise 3.2 percent this year and 2.8 percent next year. That means profits will continue to be in record-breaking territory while we are also seeing more people than ever occupy hotel rooms.
Hoteliers should continue to push rates as much as possible, especially closer to stay dates. Smart revenue management will help you break records for months to come.
“Lodging sales went up 6.3 percent in October, the 68th consecutive month of growth,” Quinlan said. “Commercial lodging sales were up 11.4 percent in September. You have negotiating power.”
2. Gas is ‘Cheap’
I never understood why gas is always expensive or cheap, but never the right price. That will continue to confound me, but one surprising fact won’t: The world is awash in oil. This is very contradictory to the belief that we are in a period post "peak oil," a phrase meant to evoke the fear that we will never be able to produce more oil than we are today.
“We have an absolute glut of oil. It is equivalent to giving consumers a raise where they didn't have one before,” Quinlan said.
Between the affordability of gas and an innate desire to travel, customers are coming by car more often. They are ripe to stay in hotels and are in fact driving (sorry!) the industry to its record profitability.
3. People Always Eating Out
Nearly half of all food spending is in restaurants now compared to grocery stores. Wow! In fact, 48 percent of food spending is made dining out. Quinlan attributes this to our "experience" culture and that restaurants are a great place to spend with family and friends.
Also, people are spending more per meal dining out, too. Fast-food sales have cooled at the expense of higher-priced fast-casual outlets. Think McDonald’s vs. Panera Bread. In all, fast-casual dining sales are 6.2 percent this year.
4. Here Comes That Word Again: Experience
Quinlan says spending is up in all regions regarding hospitality, which she pegs as the new normal. “We want to make memories and do not want to buy stuff anymore,” she said, a point I have been hammering home now since we left behind the Great Recession.
“We do not want McMansions and we are traveling more. Simply put, we want money to spend on experiences,” Quinlan said.
Are you seeing the signs of continuing great times? Perhaps you’re seeing a very different picture? Let me know with an email at [email protected], or on Twitter and Instagram @TravelingGlenn and share your opinions with me.
Glenn Haussman is editor-at-large for HOTEL MANAGEMENT. His views expressed are not necessarily those of HOTEL MANAGEMENT, its parent company Questex Media Group and/or its subsidiaries.